Dell 4Q Earnings, Revenues Drop

Dell Inc.'s fourth-quarter profits plunged 33 percent because of weak sales
of laptops and notebooks, and the computer maker still faces an unresolved federal
accounting probe, customer service complaints, several shareholder lawsuits
and stiff competition from rivals.

But amid another disappointing quarter, analysts said Dell at least appears
ready to do something about its many problems, even if it takes years to resolve.

Dell said it earned $673 million, or 30 cents per share, in the quarter ended
Feb. 2, compared with $1.01 billion, or 43 cents per share, a year earlier.
Revenue fell 4 percent to $14.4 billion.

Analysts had expected the PC maker to earn 29 cents per share in the most recent
quarter, according to a survey by Thomson Financial. The company didn't provide
year-ago figures in its release.

Most glaring was the revenue shortfall in mobility products and desktop PCs,
which combined account for 58 percent of Dell's revenue.

Analysts speculated that Dell's direct-sales model, which allows business and
consumers to buy equipment directly from the company, is no longer the best
way to sell products, especially portable, personal devices like notebooks.

Shifting tastes mean many consumers want to pick up and examine notebooks before
they buy one, analyst Tim Bajarin of Creative Strategies said.

Just look at rivals like Apple Inc. and Hewlett-Packard Co., which during the
same period saw robust sales of laptops because of good marketing and widespread
retail availability, Bajarin said.

"I do believe Dell's going to have to be much more creative in reaching
out to new customers who traditionally would only look at retail," he said.

Dell's results, issued in the form of a press release, outlined several turnaround
plans, including streamlining operations, shortening product development cycles
and developing new approaches to manufacturing and distribution.

While lacking specifics, Dell's willingness to at least mention some changes
was encouraging, said Carmi Levy, senior research analyst with Info-Tech Research
Group.

"It's a matter of going into new businesses, trying to compete beyond
the core hardware market," he said. "But these are things that do
not change overnight, these are yearslong strategies."

In January, Michael Dell resumed control of the company he founded as chairman
and chief executive officer. He replaced his hand-picked successor, Kevin Rollins,
who stepped down in January.

His first action has been to revamp his top executive team, luring top corporate
executives from Motorola Inc. and Solectron Corp. in recent weeks. In December,
Dell replaced its chief financial officer with Donald Carty, the former chief
executive of AMR Corp., parent of American Airlines.

Meanwhile, Dell has yet to resolve an accounting investigation led by the Securities
and Exchange Commission.

The U.S. attorney for the Southern District of New York has also subpoenaed
documents related to Dell's financial reporting from 2002 to the present.

It means Dell's earnings statements from the second, third and fourth quarters
are preliminary and have yet to be filed with the SEC.

Dell said he was working as quickly as possible to resolve its many problems
but did not offer any time frame.

"We won't achieve our goals overnight, but we will achieve our goals,"
Dell said in a release. "We will be known again for strong operating and
financial performance and a great experience for our customers. But it will
take time to realize the future benefits of the improvements we are making today."

Roger Kay, president of Endpoint Technologies Associates Inc., said he was
concerned about the myriad issues Dell faces. But he said like other large companies
that have faced tough times, it should be able to turn things around eventually.

"The fact that they can't say when it's going to get any better, those
things are not very reassuring," Kay said. "But it doesn't mean that
they won't get it back together. I have a lot of faith that they're going to
pull it together over time."

Dell shares rose 16 cents to $23.17 in morning trading Friday on the Nasdaq
Stock Market, where they have ranged from $18.95 to $30.80 in the past year.